The best way out of US debt spiral is robust economic growth
We have seen outsize investor focus on inflation and the Federal Reserve’s response to it. But while monetary policy gets most of the headlines, the much bigger long-term economic threat is our rapidly growing federal debt.
TL;DR
- Federal debt is a greater long-term economic threat than inflation and the Federal Reserve's response.
- The US deficit is around $2 trillion, representing about 30% of the federal budget.
- More than half of the budget deficit is due to interest on debt.
- Rising debt and interest rates have created an unsustainable compounding cycle of increasing interest expenses.
- Average interest rates on federal debt have risen significantly, from 1.70% in 2021 to 3.44% currently.
- Gross interest expense is projected to rise from $565 billion in fiscal 2021 to $1.22 trillion in fiscal 2026.
- Government spending at all levels combined with regulatory compliance costs consume nearly half of GDP.